Why investors should stay away from ScottsMiracle-Gro

CNBC’s Jim Cramer on Thursday urged investors to resist the urge to add ScottsMiracle-Gro to their portfolios despite the stock’s low valuation.

“Historically, this has been a great time of the year for anything garden related because it’s planting season and Scotts is a name we’ve been getting a lot of questions about… But in the last thirteen months those stocks have been wiped out,” said the presenter. “Mad money”.

“While ScottsMiracle-Gro may seem cheap on a price-to-earnings basis, the problem is that the earnings outlook continues to deteriorate…and management doesn’t realize how bad things are going to be,” he later added.

Shares of ScottsMiracle-Gro fell 6% on Thursday. Two days earlier, the company reported higher-than-expected earnings for the previous quarter.

JPMorgan upgraded ScottsMiracle-Gro from Neutral to Higher on Wednesday, citing stock valuation, strong margins and market leadership. Stifel has downgraded the stock from Overweight to Hold.

Cramer said he agreed with Stifel’s more bearish stance on Scotts, especially as the company struggles with rising raw material costs, lack of confidence on the $8-per-share earnings target, and his worries about the performance of Scotts’ Hawthorne unit. . Hawthorne is a cannabis grower, and Cramer says the industry has been hit hard over the past year.

“On top of that, the Scotts have a pretty ugly balance sheet that they don’t see management going for an aggressive buyout. In short, things are bad and there is little Scotts can do to improve it,” Kramer said.

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Denial of responsibility